Trade Imbalances, Export Structure and Wage Inequality

33 Pages Posted: 23 May 2014

See all articles by Paolo Epifani

Paolo Epifani

Bocconi University - Department of Economics

Rosario Crinò

Catholic University of Milan

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Date Written: May 2014

Abstract

We study, both theoretically and empirically, how trade imbalances affect the structure of countries’ exports and wage inequality. We show that, in a Heckscher–Ohlin model with a continuum of goods, a Southern (Northern) trade surplus leads to an increase (reduction) in the average skill intensity of exports, in the relative demand for skills and in the skill premium in both countries. We provide robust support for the mechanism underlying these predictions using a large panel of countries observed over the past 30 years. Our results suggest that the large and growing North–South trade imbalances arisen over the last three decades may have exacerbated wage inequality worldwide.

Suggested Citation

Epifani, Paolo and Crinò, Rosario, Trade Imbalances, Export Structure and Wage Inequality (May 2014). The Economic Journal, Vol. 124, Issue 576, pp. 507-539, 2014, Available at SSRN: https://ssrn.com/abstract=2441387 or http://dx.doi.org/10.1111/ecoj.12134

Paolo Epifani

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Rosario Crinò

Catholic University of Milan ( email )

1 Largo A. Gemelli
Milano (Milan), MI Milano 20123
Italy

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